Budget 2012 sketch: More tax cuts, Gromit?

The biggest cheer during this year's Budget was not about the top rate of income tax, or extra cash for businesses, or that the economic forecasts are improving. It was about whether Wallace and Gromit would remain in the UK.

The chancellor was of course referring to plans to boost Britain as a location for the production of "premium" television programmes like Birdsong and Downton Abbey. You won't find it in the official text of the Budget statement, but there can be no denying these words left Osborne's mouth: "It is the determined policy of this government that we keep Wallace and Gromit exactly where they are!" Tory backbenchers enjoyed Osborne's use of Miliband and Balls' nicknames of course, but the roar of approval also reflected a triumphant exultation of these very British characters in the midst of these embattled times.

It was a very jingoistic Budget. The chancellor is instinctively pulled towards flagging up the strength of the UK economy on the world stage. This is the context within which he frames the issuing of 'perpetual' Treasury bonds. It explains his bullish stance on the need for exports and the determination to compete on the global stage.

"Do we watch as the Brazils and the Chinas, and the Indias of this world power ahead of us in the global economy," Osborne asked, "or do we have the national resolve to say 'no, we won't be left behind, we want to be out in front'?" It's why he has cut corporation tax by another one per cent, an important measure which is unlikely to attract the attention it deserves in the coming hours.

The national ambition is there, but Osborne understands that the Budget is not really about Britain's standing on the world stage. It's not even about the future of Wallace and Gromit, important though that obviously is. No, this is about whether ordinary people in Britain are going to be better off. It's a simple question, really. There was a sense he was trying to dodge the issue.

Look at the tone of his rhetoric and you'll see what I mean. Osborne's language has moved on from the dark days of the spending review. No more "difficult decisions" on offer. Nor is he yet at the end of the narrative curve he hopes to reach in 2015, when he will present a recovered, prosperous economy to the British electorate before the next general election. No, this is a midterm Budget, where much of the pain is still to come. So the overriding tone was one of hard work.

"This Budget rewards work," Osborne began firmly. "Britain is going to earn its way in the world." That language continued throughout. "The journey is far from over, but progress is being made... There is no other road to recovery".

It is the Liberal Democrats who take the greatest credit for this. They were determined to be seen to be getting their way, that's for sure, thanks to some delightedly unabashed revelling in the policy they've fought for. They cheered, they waved their order papers, with a gusto only slightly increased by the enthusiastic encouragement of their chief whip, Alistair Carmichael. The contrast with their stationary, mute Tory colleagues was very noticeable. It painted a clear picture: it's because of the Lib Dems that the coalition is pushing through the increase in the personal allowance sooner rather than later. From next April the first £9,025 earned won't be subject to any income tax at all - a major shift which the Lib Dems are taking all the credit for.

Despite insisting that "the central goal of this Budget is to support working families," the chancellor has left himself open to accusations from the opposition that Osborne's primary focus has actually been the rich. As expected, the 50p top rate of income tax has been cut to 45p. "Today marks the end of 'we're all in together'," Ed Miliband declared scornfully in response. Osborne insists other measures are increasing the amounts the wealthy have to pay by five times the amount the 50p rate had raised.

Here the Lib Dems looked less pleased. Those measures do not include the introduction of a mansion tax, as they had pushed for; instead stamp duty is being increased to seven per cent on homes worth over £2 million. That forms part of broader measures against tax avoidance and evasion, which Osborne labelled "morally repugnant". Life in coalition is all about compromises; perhaps the reason they so ostentatiously made a meal of the income tax threshold increase was because of their displeasure at the final result of their 50p negotiations. In truth, neither side are likely to be that happy by the way these talks have turned out. But that's politics.

This was a Budget when such headaches as economic growth seemed, somehow, to have taken a backstage position out of the limelight. It was instead about politics in a more distilled form, with both the Lib Dems and Labour fighting the interests of the wealthy protected by the Tory party in their own distinct ways. The coalition's junior party feel like they are making a real difference from within government; the opposition wasted no time in focusing on the inequality of this year's measures.

Miliband acknowledged that Wallace and Gromit were important, after much nagging from Tory MPs, but his main focus was on the characters of Downton Abbey. These, he said, were "out of touch millionaires who act like they're born to rule but turn out to be not very good at it". We knew where he was going with this. "It sounds familiar, doesn't it?" he said, to laughter. "We know it's a costume drama, they think it's a fly-on-the-wall documentary!"

For once it was Osborne and Cameron's turn to feel uncomfortable, as Miliband inquired whether they would benefit personally from the 50p rate of relief. The prime minister and chancellor, genuinely discomfited, refused to indicate either way. Miliband shook his head sadly - just as Gromit would have done.